First-Time Homebuyer Programs & Grants – A Complete Guide

What is a First-Time Homebuyer?

You might be a first-time homebuyer and not even realize it. According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is anyone who has not owned a home in the last three years. This definition opens up opportunities for more individuals, including those who may have previously owned a home but have been renting for a few years.

HUD’s Criteria for First-Time Homebuyers:

• Has not owned a primary residence in the last three years.
• A single parent who only owned a home with a former spouse.
• A displaced homemaker who only owned a home with a spouse.
• A person who has only owned a residence not permanently affixed to a foundation.

Programs Offering Down Payment Assistance to First-Time Homebuyers

Down payment assistance (DPA) programs are designed to help first-time homebuyers overcome the financial hurdle of saving for a down payment. These programs provide financial aid in the form of grants, low-interest loans, or forgivable loans, allowing eligible buyers to purchase a home without needing a substantial upfront payment. Many DPA programs are available at the federal, state, and local levels, each with unique requirements and benefits. Typically, down payment assistance programs are aimed at low- to moderate-income buyers, though criteria may vary.

How Down Payment Assistance Programs Work

Down payment assistance can come in various forms, depending on the program and the buyer’s needs:

• Grants: Non-repayable funds that cover a portion or all of the down payment.
• Low-interest loans: Additional loans that offer favorable terms and may be repaid over time or deferred until the home is sold.
• Forgivable loans: Loans that are forgiven after a specified period, often contingent on living in the home for a set number of years.

Each of these options has unique benefits and qualifying criteria, so it’s essential to choose a program that aligns with your long-term goals and financial situation.

1. The Chenoa Fund

The Chenoa Fund is a down payment assistance program offered by the CBC Mortgage Agency, helping first-time and repeat buyers with a forgivable loan for down payments. This program works alongside FHA loans and provides financial support to those who meet income and credit requirements.

• Type: Forgivable second mortgage with the option to use as a loan or grant
• Requirements: Minimum 620 credit score; income limits apply based on HUD Area Median Income
• Terms: Forgivable after 36 consecutive on-time payments; available for 3.5% down payment
• Best For: Buyers needing down payment help with FHA loans

Learn more on the Chenoa Fund website.

2. National Homebuyers Fund (NHF)

The National Homebuyers Fund provides down payment assistance grants to first-time and repeat homebuyers. NHF covers up to 5% of the mortgage loan amount, helping ease the burden of upfront costs. Assistance is available in the form of a grant, which does not need to be repaid.

• Type: Grant covering up to 5% of the loan amount
• Requirements: Minimum 640 credit score; must meet NHF eligibility requirements
• Terms: No repayment required; can be used for FHA, VA, USDA, and conventional loans
• Best For: Buyers seeking flexible loan options and non-repayable assistance

Visit the National Homebuyers Fund website for more information.

3. Community Seconds by Fannie Mae

Community Seconds is a program designed to provide additional down payment funds for eligible first-time buyers, allowing homebuyers to use secondary financing from nonprofits, local government agencies, or employers in conjunction with a Fannie Mae loan.

• Type: Second mortgage program that can cover down payment and closing costs
• Requirements: Must meet Fannie Mae income and credit requirements; terms vary by provider
• Terms: Repayment terms vary; often deferred or forgiven after a certain period
• Best For: Buyers who need more extensive financial support and have access to local assistance programs

More details can be found on Fannie Mae’s Community Seconds page.

4. Good Neighbor Next Door Program

The Good Neighbor Next Door Program, offered by the U.S. Department of Housing and Urban Development (HUD), provides a 50% discount on homes for eligible teachers, law enforcement officers, and emergency responders in designated revitalization areas. This program can dramatically reduce the purchase price and therefore lower the down payment needed.

• Type: 50% discount on HUD homes in revitalization areas
• Requirements: Minimum 620 credit score; buyer must work in an eligible profession
• Terms: Buyer must commit to living in the home for at least three years
• Best For: Teachers, law enforcement, EMTs, and firefighters looking to buy in revitalization areas

Find out more on the HUD Good Neighbor Next Door page.

5. HomePath Ready Buyer Program by Fannie Mae

The HomePath Ready Buyer Program is specifically for first-time buyers interested in purchasing a HomePath property (a foreclosed property owned by Fannie Mae). Buyers can receive up to 3% in closing cost assistance after completing an online homebuyer education course.

• Type: 3% closing cost assistance on HomePath properties
• Requirements: Must complete an approved homebuyer education course; income limits apply
• Terms: Available for Fannie Mae-owned properties only
• Best For: Buyers looking for affordable homes with additional closing cost assistance

Learn more on Fannie Mae’s HomePath website.

These down payment assistance programs offer essential support for first-time homebuyers, helping to make homeownership more accessible. By evaluating eligibility requirements and comparing programs, buyers can find the right assistance to help turn their homeownership dreams into reality.

Loan Programs for First-Time Homebuyers

The following table provides a quick comparison of first-time homebuyer loan programs, detailing minimum credit scores, down payment requirements, and other essential features. Each program is designed to make buying a home more achievable for first-time buyers, with low down payment requirements, flexible credit score standards, and other benefits.

FHA Loan

FHA loans are insured by the Federal Housing Administration, offering low down payment options and flexible credit score requirements, making them ideal for first-time buyers. With a down payment as low as 3.5%, they’re accessible to many individuals who may not have perfect credit.

The FHA program is also known for its lenient requirements, which include a higher allowable debt-to-income ratio (DTI) compared to many conventional loan programs. FHA loans are widely used by those seeking homeownership for the first time due to the affordability and flexibility they offer.

• Minimum credit score of 500 with 10% down or 580 with 3.5% down
• Available for primary residences only
• Requires mortgage insurance premium (MIP) regardless of down payment
• Higher debt-to-income ratios allowed (up to 50%)

VA Loan

VA loans are available to eligible veterans, active-duty service members, and select military spouses, allowing for zero down payment and no mortgage insurance. VA loans have extremely competitive terms, including the possibility of financing 100% of the home’s purchase price.

This loan program is one of the most generous and beneficial options available, providing favorable interest rates and no private mortgage insurance (PMI) requirements. It’s designed to support the men and women who have served in the military, offering a unique and accessible opportunity for homeownership with minimal financial burden.

• No down payment required
• No private mortgage insurance (PMI)
• Minimum credit score of 580-620, depending on lender
• Access to competitive interest rates and flexible terms

USDA Loan

USDA loans provide no-down-payment financing to eligible low- to moderate-income borrowers purchasing homes in rural areas. These loans are specifically designed to encourage homeownership in less populated areas, fostering community development and growth.

USDA loans offer low-interest rates and are backed by the government to ensure accessibility for families who might otherwise struggle to obtain a mortgage. Additionally, the USDA loan program features a relatively low mortgage insurance premium, making homeownership more affordable for eligible borrowers. This program is a great choice for those looking to live in rural or suburban areas.

• Minimum credit score of 620
• Zero down payment required
• Low 0.35% annual mortgage insurance premium
• Income restrictions apply based on location and household size

Conventional 97 Loan

The Conventional 97 loan allows for a low down payment of just 3% for eligible first-time buyers. This fixed-rate loan option is designed to make homeownership more accessible by providing affordable terms and minimal upfront costs.

The 3% down payment requirement makes it an excellent choice for individuals or families who may have difficulty saving for a traditional 20% down payment. With a Conventional 97 loan, homebuyers also benefit from competitive interest rates and no private mortgage insurance (PMI) requirement if the borrower achieves 20% equity. This makes the program an affordable alternative for many buyers.

• Minimum credit score of 680
• 3% down payment requirement
• No private mortgage insurance required with 20% equity
• Can be used for primary residences only

HomeReady by Fannie Mae

HomeReady loans are designed for low- to moderate-income borrowers, providing affordable financing with a 3% down payment option. This program makes it easier for buyers to enter the housing market by offering lower down payment requirements and competitive interest rates.

In addition to the low down payment, HomeReady allows for higher allowable income, including income from non-borrowing household members, making it ideal for those with a limited income. To qualify for HomeReady, borrowers must meet specific income limits and complete a homebuyer education course. It’s a strong choice for families looking for a way to secure affordable home financing.

• Minimum credit score of 620
• 3% down payment requirement
• Borrowers must meet income limits (100% of area median income)
• Requires homebuyer education course

Home Possible by Freddie Mac

Home Possible loans are targeted at low- to moderate-income first-time buyers, offering flexible terms and low down payment options. Like HomeReady, Home Possible aims to make homeownership more achievable for those who may not otherwise qualify for a traditional mortgage.

It offers a 3% down payment requirement and includes flexible underwriting guidelines. Home Possible also allows for a higher debt-to-income ratio (up to 50%) and allows borrowers to include income from non-borrowing household members, further increasing eligibility for applicants. This program is particularly beneficial for those who need more flexibility in the qualification process.

• Minimum credit score of 620
• 3% down payment requirement
• Debt-to-income ratio (DTI) limit of 50%
• Income limits apply based on property location

203k FHA Rehab Loan

FHA 203k loans are designed for buyers who want to purchase and renovate a property with a single mortgage, making it ideal for fixer-uppers. This loan offers the flexibility to buy a home in need of repairs and finance both the purchase and the renovation costs into a single mortgage. This makes it easier for homebuyers to invest in homes that may not meet traditional home standards but have great potential.

With a minimum credit score requirement of 580 and a 3.5% down payment, FHA 203k loans are accessible to a wide range of buyers who are looking to invest in a property that needs improvements.

• Minimum credit score of 580
• 3.5% down payment requirement
• Allows financing for both purchase and renovations
• Available for primary residences only

Good Neighbor Next Door Program

HUD’s Good Neighbor Next Door program offers significant home discounts for eligible professionals like teachers, law enforcement, and emergency responders. This program helps professionals purchase homes in revitalization areas by providing a 50% discount on HUD-owned properties.

Participants are also required to make a minimal down payment of $100, making this an affordable option for first-time homebuyers working in critical public service fields. It’s an excellent opportunity for qualifying teachers, law enforcement officers, and emergency medical technicians to become homeowners while contributing to community development.

• Minimum credit score of 620
• $100 down payment for eligible properties
• 50% discount on HUD-owned homes
• Available for specific professions in designated revitalization areas

Additional Programs for First-Time Homebuyers

FHA Energy Efficient Mortgage (EEM) Program

The FHA Energy Efficient Mortgage program lets buyers incorporate up to $25,000 in energy-efficient upgrades into their FHA loan, helping to lower long-term utility costs. With a minimum 580 credit score and 3.5% down payment, this program is accessible to many homebuyers aiming to reduce their energy expenses while achieving homeownership.

• 3.5% down payment requirement
• Up to $25,000 in financing for energy-efficient home improvements
• Designed to reduce future energy costs
• Ideal for environmentally conscious buyers
  More details can be found on the FHA EEM Program page.

Fannie Mae HFA Preferred Loan

The Fannie Mae HFA Preferred Loan, offered through state Housing Finance Agencies (HFAs), provides reduced private mortgage insurance (PMI) for first-time buyers with a low 3% down payment. This program, geared toward low- to moderate-income buyers, aims to make homeownership more affordable.

• Minimum credit score of 620 required
• Reduced PMI rates
• 3% down payment requirement
• Designed for primary residences only
  Learn more at the Fannie Mae HFA Preferred Loan page.

State and Local Housing Assistance Programs

State and local governments offer a range of housing assistance programs tailored for first-time buyers, often providing down payment support, low-interest loans, or forgivable loans. Requirements vary by state, but these programs are designed to help buyers with location-specific support.

• Includes grants, forgivable loans, and low-interest loan options
• Requirements and benefits vary by state and municipality
• Available for primary residence purchases
• Ideal for those seeking localized financial assistance
  Find more information through your state’s housing finance agency or local government website.

Native American Direct Loan (NADL) Program

Exclusively for Native American veterans, the VA-backed NADL program assists in buying, building, or renovating homes on Federal Trust Land. With no down payment and no PMI, this program offers competitive terms and is tailored for Native American veterans in need of flexible financing options.

• Minimum credit score of 580
• No down payment required
• No private mortgage insurance (PMI)
• Best suited for Native American veterans
  Learn more about the Native American Direct Loan program.

NACA (Neighborhood Assistance Corporation of America) Program

NACA offers a unique mortgage with no down payment, no closing costs, and no private mortgage insurance, aiming to support low- to moderate-income buyers with below-market fixed interest rates. Buyers must meet income and community involvement requirements to qualify for this affordable mortgage option.

• No down payment required
• No PMI or closing costs
• Fixed below-market interest rates
• Designed for low- to moderate-income buyers
  Visit the NACA program page for more details.

FHA Section 184 Loan Program for Native Americans

This loan program is tailored to Native Americans seeking to buy or build homes on tribal land, featuring a low down payment requirement and government-backed mortgage insurance. The FHA Section 184 program aims to make homeownership more accessible for Native American buyers.

• Minimum credit score of 580 with 2.25% down for loans over $50,000
• Government-backed mortgage program
• Available for homes on tribal land
• Suitable for Native American first-time homebuyers
  Learn more about the FHA Section 184 program.

HUD’s Dollar Homes Initiative

HUD’s Dollar Homes Initiative allows state and local governments to purchase foreclosed homes for $1, later sold to low-income families. Often accompanied by grants for repairs, this program offers an affordable pathway to homeownership for buyers willing to invest in property improvements.

• Low-cost home purchase opportunities
• Often includes grant options for home repairs
• Helps revitalize neighborhoods
• Suitable for buyers open to renovations
  Learn more on the HUD Dollar Homes page.

Freddie Mac’s CHOICERenovation Loan

The CHOICERenovation Loan by Freddie Mac allows homebuyers to finance both the purchase price and renovation costs into a single mortgage. With a 3% down payment and a minimum credit score of 620, this program suits those interested in purchasing and fixing up a property.

• Financing up to 75% of the completed appraised value
• 3% down payment requirement
• Ideal for buyers seeking a fixer-upper
• Flexible renovation financing options
  Discover more about Freddie Mac’s CHOICERenovation Loan.

Conclusion: Making Homeownership a Reality

With the numerous loan programs, down payment assistance options, and grants available in 2024, first-time homebuyers have more opportunities than ever.

Whether you’re eligible for a USDA loan, VA loan, or FHA loan, there’s likely a program that suits your needs and financial situation. It’s essential to research thoroughly, compare options, and seek guidance from a HUD-approved housing counselor or mortgage advisor to help navigate the process.

Homeownership can be within reach – and with the right resources, you’ll be one step closer to moving into your dream home.

Frequently Asked Questions

What qualifies someone as a first-time homebuyer?
According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is anyone who hasn’t owned a primary residence in the past three years. Even if you owned a home before, you might still qualify as a first-time buyer under these guidelines.

Are there programs to help with the down payment?
Yes, many programs exist to help first-time buyers cover down payments. Options include state and local down payment assistance programs, FHA loans, USDA loans, and VA loans, which may offer low or even no down payment options depending on your eligibility.

What credit score is required to buy a home as a first-time buyer?
Credit score requirements vary by loan program. FHA loans, popular among first-time buyers, generally require a score of at least 580 with a 3.5% down payment. Conventional loans may require a minimum of 620, while USDA and VA loans may allow for lower scores, depending on the lender.

How much should I budget for closing costs?
Closing costs typically range from 2% to 5% of the home’s purchase price. Costs may include appraisal fees, title insurance, and other administrative expenses. Some first-time homebuyer programs and loan options allow you to roll these costs into the loan or provide assistance.

Is mortgage insurance required?
It depends on your loan type and down payment amount. FHA loans require mortgage insurance regardless of the down payment, while conventional loans with less than 20% down require private mortgage insurance (PMI). VA and USDA loans generally don’t require mortgage insurance.

Can I buy a home with student loan debt?
Yes, it’s possible to buy a home with student loan debt, though lenders will consider your debt-to-income (DTI) ratio. Some loan programs, like FHA and VA loans, allow higher DTI ratios, and income-driven repayment plans may also help make qualifying easier.

What are the benefits of pre-approval?
Pre-approval provides an estimate of how much you can borrow, which can help streamline your home search. It also signals to sellers that you’re a serious buyer with financing ready, giving you an advantage in competitive markets.

Is a home inspection necessary?
A home inspection is not legally required but is highly recommended. Inspections identify potential issues with the property, like structural or electrical problems, allowing you to make an informed decision or negotiate repairs before finalizing the purchase.